For the average layman, the stock market can seem like a mystical place. A place for white-collar gamblers where stocks are bought and sold like betting slips. Although it can seem like a high-end gambling operation with millions on the line, it is far more shrewd than that.

Most successful investors use strategy when investing for minimizing risk and maximizing gains. In-depth research about any company they are investing in is also wise. Furthermore, many investors build knowledge over time about how certain stocks perform during certain periods of time or, world events. For example, some of the best stocks to buy during a recession are in discount stores, and DIY. This is because people are trying to scale back their expenditure.

However, it is not always possible to foresee events that devalue your investments. For example, a company may attract damaging international media attention if a negative video about the business goes viral.

The stock market is not just for millionaires and wall street traders. Modern investors can come from all socioeconomic backgrounds, and investments can be made using a mobile phone. Most stock traders have a degree in a relevant field. However, for those wanted to polish up their knowledge of the stock market, or have a go at investing a wealth of knowledge can be garnered from stock market books.

Stock market books for absolute beginners

Stock Investing For Dummies by Paul Mladjenovic

The For Dummies series of books is perhaps the most widely recognised catalogue of beginner instruction manuals. They have informed countless people across the world with simple easily digestible books on various topics. This book continues this trend. It swaps the complex language of industry terminology for easy to read, and easy to follow, instructions and tips. Topics covered include:

  • How to spot and decrease risks
  • How to research potential stocks
  • Understanding company documents such as annual reports
  • How to analyse the demand and growth of different industries
  • How to use corporate buybacks
  • Fraud protection
  • Common investment challenges
  • Understanding resources and financial ratios
  • How to predict stock spikes or crashes

A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today. Matthew R. Kratter

Firstly this book was written by industry expert Matthew R. Kratter who has over 20 years of experience in the business. This includes working as a hedge fund manager. Along with his book he continues to expand the minds of stock market traders as the founder of Trader University, with his online courses and guides.

A number of key topics – essential for stock market investing, and understanding, are covered. This includes basic lessons like opening a brokerage account and the best places to do so. The book covers how to buy stock for the first time, and momentum stock trading. It also shows common stock market mistakes to prevent you from falling into some of the pitfalls of investing. The guide covers all bases, to ensure you can begin a tentative journey into stock market trading.

The definitive guide on the stock market

The Intelligent Investor by Benjamin Graham is said by many sources to be the bible of the stock market. Benjamin Graham taught none other than Warren Buffett nicknamed ‘Oracle of Omaha‘ for becoming one of the most successful investors ever.

Though it was released in 1949 it continues to influence and shape the minds of modern investors. It is perhaps the most important investing book to ever hit the shelves. Although it is a bit dense, especially compared to beginner guides, it is brimming with information.

At the forefront of this investing book is the philosophy of value investing. Value investing utilizes long-term investment strategies, prioritizing maintaining a solid portfolio, over short-term (risky) gains.

The Intelligent Investor shows you how to perform fundamental analysis on a company, including financial performance. This strategy is prioritized over market swings. The fact that this book has thrived for over 70 years, is testament to how informative it is and how effective the strategies are.

The book on the random walk hypothesis

Written by a Princeton economist, Burton G. Malkiel, a Random Walk Down Wall Street has become one of the elite guides on investing and trading. This book helped bring to light the random walk hypothesis cementing its popularity.

Malkiel argues in this book that asset prices change like the unpredictability of a random walk. He believes that one cannot have continued success against market averages. The theory also runs in line with the efficient market hypothesis, arguing long-term buy-and-hold strategies are the best investments.

He controversially stated in the book: “A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

This highlighted the randomised nature of short-term market predictions. He believes it is far better to build a balanced portfolio that runs in line with market performance. Other information covered includes fundamental and technical analysis. A Random Walk Down Wall Street covers different types of investments including tangible assets. The most updated version also includes advice on investing in crypto currency.

The best stock market book featuring industry experts

Market Wizards by Jack D. Schwager features interviews with leading trading experts in the industry. These market wizards give expert information on financial markets. In essence, they talk about what makes them more successful than other wall street traders. In particular, it shows how each of these experts has formed their own winning system. Top trading investors featured in the book include:

  • Bruce Kovner
  • Richard Dennis
  • Paul Tudor Jones
  • Michel Steinhardt
  • Ed Seykota
  • Marty Schwartz
  • Tom Baldwin

This book could hold the inspirational key to developing your own magic formula.

The best book on index funds

The Little Book of Common Sense Investing was written by John C. Bogle the founder and former CEO of investment management firm Vanguard.

Bogle states in this book that low-cost index funds are the most stable investment for traders. He also uses insights from other traders to strengthen this hypothesis. Warren Buffett himself gave it his golden seal of approval in 2014 when he wrote in an Annual Shareholder Letter:

“Most advisors, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship. Rather than listen to their siren songs, investors – large and small – should instead read Jack Bogle’s The Little Book of Common Sense Investing.”

As with some of the others, this little book encourages developing wealth in the long run by developing and diversifying your investment portfolio. Bogle asserts that this is a common-sense approach to investing.

The best Peter Lynch book

Expert investor Lynch could have made this list a few times over. Thanks to his achievements in the industry he has achieved legendary status. For example, he maintained an average annual investment return of 29.2% from 1977 to 1990 whilst managing the Magellan Mutual Fund at Fidelity. In that time his investments helped turn $18 million into over $14 billion.

His most revered book is, One Up On Wall Street: How to Use What You Already Know to Make Money in the Market. This is an easy-to-read yet extremely useful guide for investors. He asserts that most people have the ability to predict the best stocks if they pay attention to everyday encounters and services.

He claims that doing this can present opportunities for investing early before professional analysts discover them. According to Lynch investing early can lead to ten bagging, meaning the stock value may increase by 10 times the original investment. Again, he is another fan of long-term investing. Meaning over the long term, if you invest early in a number of different high potential businesses your stock value will increase. This means that although you may lose money here and there, investing in ten baggers will make up for the losses.

One Up on Wall Street is brimming with advice formed from more than a decade of continued success, helping it become a best seller. He also released a book named: Beating the Streets. In this, he writes about mutual funds and that performing your due diligence in researching companies, is more beneficial than trying to find a magic formula investing strategy. He gives advice on how investing in mutual funds can help you beat wall street traders.

Best book on behavioural economics

Irrational Exuberance by Robert J. Shiller is a must for investors. This is especially useful when predicting the housing market, such as when and when not to invest. Nobel Prize winner Shiller used structural, cultural, and psychological factors to analyse, and predict, the collapse of the tech-stock bubble in the first edition. The way in which the market changes rapidly because of psychology is called psychologically driven volatility.

He made another chillingly accurate prediction in the second edition in 2005. He stated that there would be a “string of bankruptcies” and a “worldwide recession” because house prices were too high. Of course, in 2008 this did come to pass.

Many people were given mortgages by lenders which normally would have been deemed too risky. These were called subprime mortgages. This meant a spike in housing prices, which also meant that the price of mortgage repayments rose to unaffordable levels. Most people who were given subprime mortgages were also on an adjustable-rate, meaning repayments rose in line with inflation. Many people lost their homes. In America alone, households lost an estimated $16 trillion in net worth.

An investor would do well to read this book to use the formulaic analysis on their own investments. This will help an investor predict the overvaluation of assets driven by irrational exuberance by over keen investors. It will help an investor greatly in trading, by allowing them to predict crashes and sell stocks before it happens.

Best books about stocks and trading: Summary

New technology has made making trading in stock markets easier than ever. This means almost anybody with enough money can invest. However, before becoming an investor it may be prudent to brush up on both old and new ideas in the industry. Luckily there is a wealth of knowledge to be found in books by some of the best minds in the business.

For a basic understanding of stock markets, there are two books worth reading. These are:

  • Stock Investing For Dummies
  • A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today

The holy grail of books about stocks and investing is, The Intelligent Investor written by Warren Buffett’s professor, Benjamin Graham in 1949.

A Random Walk Down Wall Street by Burton G. Malkiel talks about the random walk theory and the importance of long-term strategy over quick profits.

Market Wizards by Jack D. Schwager is the best book for discovering insights from the world’s best investment professionals.

The Little Book of Common Sense Investing was written by John C. Bogle who champions low-cost index funds. He also heralds long-term investment strategies as the best way to make money.

Peter Lynch is one of the most well-regarded investment professionals in history. His number one best-selling book One Up On Wall Street. In it, he maintains that anyone can make a good investment in stocks if they keep their eyes open to everyday opportunities. In his second book Beating the Streets, Lynch recommends making an investment in a mutual fund as the best way to make money.

Irrational Exuberance by Robert J. Shiller is an excellent book for predicting markets based on cultural and psychological trends. In particular, predicting stocks that may crash such as the housing market.

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